From 1 August 2022, the introduction of the Register of Overseas Entities means that your AML verification process for overseas entities will change.
From 1 August 2022, the UK Government has introduced the register of overseas entities (ROE) as part of the Economic Crime (Transparency and Enforcement) Act 2022.
The verification for ROE is very different to the risk based approach you would take for regular AML customer due diligence under the Money Laundering Regulations 2017. The Law Society has issued a warning to solicitors to exercise caution in regards to how you conduct verifications of overseas entities, upon introduction of the ROE.
Here’s what you need to know about the change.
What are the ROE changes being made?
Overseas entities who want to buy, sell, lease, or transfer property or land in the UK, must register with Companies House, and must state who their registrable ultimate beneficial owners (UBOs) or managing officers are. The UBOs must be verified by the relevant persons before registration.
After registering with the Companies House, the overseas entity will get a unique Overseas Entity ID to give to the Land Registry when it buys, sells, transfers, leases or charges UK property or land. This results in more transparency, allowing law enforcement agencies to investigate suspicious wealth more effectively.
How will this affect my verification process?
You must complete verification checks on ALL ultimate beneficial owners and managing officers of an overseas entity before it can be registered. You will also need to provide an agent assurance code (which can be requested from the Companies House) and an overseas entity verification checks statement to confirm that you have done this.
Currently, Companies House does not let non-regulated agents (like us at First AML) file verification checks on your behalf, though we can continue to assist with the verification of overseas individuals and entities.
What is an ultimate beneficial owner (UBO)?
This is someone with significant influence over the entity; for example a person, another legal entity (i.e. a company), or a trustee that holds more than 25% shares of, or voting rights in, the entity.
The information for each UBO that you need to collect and submit can be found here.
How will this affect my overseas transactions that are in progress?
If you have an in-progress overseas transaction that is taking place, you’ll need to consider if these can be completed in compliance with the ROE. If not, you must change your approach in order to comply.
Who will it apply to?
This change will impact any clients that involve property transactions with overseas entities. An overseas entity is a legal entity (e.g. company or trust) that is governed by a country or territory that is outside of the UK. In this case, this includes the Republic of Ireland.
Does it apply retrospectively?
Yes – overseas entities who bought property or land on or after 1 January 1999 in England and Wales, and 8 December 2014 in Scotland will need to register and submit their registrable beneficial owners by 31 January 2023.
What happens if I fail to comply?
Failure to comply could result in a criminal offence both for the relevant persons, and the reporting officers, which is punishable by a fine of £2,500 and/or a prison sentence of up to 5 years. You’ll also face restrictions when buying, selling, transferring, leasing or charging property or land in the UK.
If you have overseas clients who have been involved in the sale of property or land since 1999 in England and Wales (or 2014 in Scotland), you will need to put together a process to register the ultimate beneficial owner on the ROE. To find out more, refer to the UK government website.
About First AML
First AML is an AML technology provider, and the maker of Source, an all-in-one AML platform. Source powers thousands of compliance experts around the globe to reduce the time and cost burden of complex and international entity KYC. Its enterprise-wide, long term approach to the KYC / CDD data lifecycle addresses time and cost challenges while minimising compliance, reputational and security risks.